How You Can Get a Mortgage Loan Modification
Mortgage Loan
“Mortgage loan modification” may be a new concept to you because loan modifications were not really done much until recently. Since the housing crisis and mortgage meltdown began, lenders have been forced to come up with creative ways to protect themselves from losing money. At the same time, government officials have been pushing lenders to rework the terms and conditions of troublesome mortgage loans in order to help homeowners avoid a serious foreclosure epidemic.
Many of the troublesome mortgages that people have were made by lenders who either used high-pressure sales tactics, or steered you into getting a mortgage loan you would not be able to afford after a few years. Because of this, government regulators threatened to force lenders to complete mortgage loan modifications if they would not do so voluntarily.
So what exactly is it? The term “mortgage loan modification” is a long term solution that is used to describe an *interest rate reduction, *principal balance reduction, or *loan term extension. These changes are made in order to reduce your monthly payment to a lower one that you can afford. Lessening the amount you have to pay in mortgages every month would allow you more breathing room in your wallet to cover car payments, child care, tuition, or any host of other expenses you may have.
* Interest rate reduction – If you currently have a high fixed interest rate, or have an adjustable interest rate that started off low but is set to increase, your lender may offer you a reduction in your rate to a lower fixed interest rate. This lower rate will decrease your monthly payment. For example, if you have a 30-year fixed loan for $200,000 at 8%, your monthly payment would be $1,467. If that rate gets reduced to 6%, your monthly payment goes down to $1,199.
* Principal balance reduction – If your home is worth less now than when you bought it, your lender may rework your loan so the loan amount (also called the principal balance) reflects your home’s current worth instead of what you paid for it. For example, if your home was appraised for $250,000 when you bought it but now it is only appraised for $170,000, your lender may reduce your principal balance from $250,000 to $170,000. Even if your interest rate stays the same, since you now owe less, your monthly payments will be less.
* Loan term extension – Many lenders are offering you the opportunity to take longer to pay your loan back. This is called a loan term extension. For example, if you have an aggressive 15-year loan for $200,000 at an interest rate of 8%, your current payments would be around $1,911 per month. If you extend that same $200,000 mortgage to the standard 30 years at the same interest rate of 8%, your payments would be just $1,467. Some lenders are extending loan terms up to 45 years which would make the payment just $1,371. The good thing about a loan term extension is that although you may not be planning to stay in your home for as long as your loan term, you still have the option of taking advantage of the lower monthly payment until you decide to sell and move.
If you want to know how you can get a mortgage loan modification too, it’s simple. Ask your lender for it. Millions of homeowners throughout the country are negotiating with their lenders and crafting unique plans that give their wallets a break. There are specialists that are trained to work on your behalf to get your loan modified quickly.
It is important to note that the process of any mortgage loan modification takes time. In order to get yours modified as soon as possible, begin the process right away. Make sure you work closely with your specialist to provide whatever documents and records they request. The mortgage loan modification process can be very involved, but when it is successful you get to enjoy the long-term benefits.
Leave a Comment July 23, 2009